AAON Raises 2026 Growth Guidance to 75% as Data Center Cooling Sales Triple

AAON raised its full-year 2026 sales growth guidance to 72% to 75%, up from a prior range of 55% to 60%, after data center cooling demand pushed third-quarter revenue up 84% year over year to $707.43 million. The new guidance implies full-year revenue near $2.5 billion. Diluted earnings per share more than doubled to 83 cents, beating the 57-cent consensus. The stock gained nearly 25% across two trading sessions following the report.

What drove the guidance lift?

The growth engine is BASX, AAON's data center thermal brand. BASX-branded revenue rose about 218% year over year to $397.2 million, now more than 56% of total company sales. Within the AAON Coil Products segment, bespoke liquid cooling equipment climbed roughly 255% to $165.5 million. Trailing 12-month liquid cooling sales now stand near $450 million.

Next-generation graphics processors generate substantial heat. Rising rack power density is straining legacy air cooling infrastructure. Operators are retrofitting old systems and building new liquid-cooled environments, and AAON is capturing that capital expenditure cycle through custom-engineered thermal equipment. Management noted that direct engagement with hyperscale operators on complex projects should improve revenue visibility in coming quarters.

The company's traditional commercial HVAC business also grew. AAON-branded HVAC sales rose nearly 20% to $310.2 million, supported by national account orders up about 70%. That growth came in an otherwise sluggish commercial construction environment, suggesting market share gains.

Earlier in the year, data center cooling stocks sold off after NVIDIA CEO Jensen Huang said next-generation Rubin systems could operate without water chillers. The simultaneous growth in liquid and airside cooling at AAON, alongside record commercial bookings at Trane Technologies, indicates rising rack density is expanding total facility thermal requirements across both formats rather than substituting one for the other.

How exposed is the backlog to regulatory risk?

Post-election selling hit data center infrastructure names including Vertiv on uncertainty over state-level regulations and power-grid cost allocation. AAON management addressed the concern directly on its earnings call. Less than one-third of its roughly $1.85 billion backlog sits in states experiencing regulatory friction. The backlog consists of permitted projects, not speculative builds, and over 80% is contracted to well-capitalized hyperscale customers.

Do the margins hold up?

Consolidated gross margin improved 233 basis points sequentially to 26.7%. The Coil Products segment recovered from 19.1% to 25.8% on backlog repricing and factory throughput gains. Selling, general and administrative expenses fell 400 basis points year over year to 12.5% of sales. Adjusted EBITDA of $127.2 million beat consensus by roughly 37%.

The company returned to positive free cash flow while expanding manufacturing capacity. Peer Modine Manufacturing, by comparison, suffered margin compression and negative free cash flow in the first half of its fiscal 2027 despite strong data center sales growth. AAON's Memphis facility operates at only about one-third utilization. Management sees potential annual BASX capacity above $2 billion as facilities ramp, though not by the end of 2027. Net leverage sits at 1.0x, with a 10-cent quarterly dividend and a $70 million buyback authorization intact.

What is the accounting issue?

AAON disclosed a material weakness in internal controls over BASX project revenue recognition, plus separate errors involving software subscriptions. The company restated first- and second-quarter results, increasing first-half 2026 net sales by $10.7 million and diluted EPS by nine cents. AAON said it found no evidence of fraud or misconduct, and the economics of the underlying contracts are unchanged. Remediation of manual controls and working capital management remain execution tests.

Total backlog dipped 5.9% sequentially on faster deliveries and holiday scheduling, but remained 40.5% higher year over year.

What comes next?

AAON trades at roughly 22x forward earnings against projected 2027 earnings growth of about 50%. Short interest is elevated, with days-to-cover just over six, well above peers Carrier Global and Lennox International. Baird and Oppenheimer trimmed price targets slightly on peer multiple compression and the restatement but kept Outperform ratings. The consensus is Moderate Buy with an average target of $106.33, near 40% above the $76.19 share price. A segment reporting change in the fourth quarter, splitting AAON and BASX results, should give investors clearer visibility into data center thermal margins.